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savannahstate.edu/misc/dowlingw/3155/Practice%20Exams/review_-_chapters_1-6.htm
1.
Since M-2 excludes time deposits, M-2 is a less comprehensive measure of the money supply than M-1.
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2.
When individuals withdraw cash from checking accounts, the money supply is unaffected.
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3.
What serves for money in France may not be money in another country.
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4.
Since investors prefer short-term securities to longer-term securities, the yield curve is always positively
sloped.
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5.
The underwriting of an issue of securities guarantees the firm issuing the securities a specified amount of
money.
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6.
If an issue of securities is overpriced, the underwriters may let the price fall to sell the securities.
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7.
The larger the margin requirement, the greater the proportion of a stock purchase the investor may borrow.
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8.
When funds are deposited in a savings account, the excess reserves of banks are unaffected.
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9.
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10.
If a firm issues securities that are sold to a commercial bank, individuals' savings are directly transferred to
the firm.
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11.
Only large commercial banks are subject to the regulation of the Federal Reserve.
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12.
If the Treasury borrows from the Federal Reserve, the lending capacity of banks is reduced.
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13.
If the Treasury sells debt that is purchased by corporations and uses the funds to purchase military
equipment, the excess reserves of the banking system are not affected.
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14.
The President of the United States appoints the Federal Open Market Committee.
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15.
Under a system of fluctuating exchange rates, a currency will depreciate if supply exceeds the demand for
the currency.
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Multiple Choice
Identify the choice that best completes the statement or answers the question.
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16.
b.
c.
d.
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17.
b.
c.
d.
the difference between the yield (interest rate) on government and corporate debt
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18.
M-2 includes
1.
demand deposits
2.
savings accounts
3.
a.
1 and 2
b.
2 and 3
c.
1 and 3
d.
all three
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19.
the prospectus
b.
c.
d.
the syndicate
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20.
b.
c.
d.
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21.
b.
c.
d.
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22.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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23.
is a financial intermediary
b.
is a secondary market
c.
d.
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24.
Nasdaq
b.
SEC
c.
SIPC
d.
FDIC
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25.
b.
c.
d.
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26.
life insurance
b.
corporate securities
c.
municipal securities
d.
insurance policies
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27.
b.
demand deposits
c.
total reserves
d.
excess reserves
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28.
2.
3.
a.
1 and 2
b.
1 and 3
c.
2 and 3
d.
1, 2, and 3
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29.
b.
c.
d.
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30.
selling securities
2.
buying securities
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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31.
If the federal government runs a deficit and finances the deficit by borrowing from the Federal Reserve,
1.
2.
3.
4.
a.
1 and 3
b.
1 and 4
c.
2 and 3
d.
2 and 4
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32.
b.
c.
d.
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33.
reserves market
b.
stock market
c.
bank market
d.
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34.
b.
c.
d.
taxation
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35.
2.
3.
4.
a.
1 and 2
b.
1 and 3
c.
2 and 4
d.
3 and 4
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Problem
36.
If the price of the European euro is $1.26, how many euros are necessary to purchase $1.00?
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37.
What is a nation's cash inflow (outflow) on its current account and its capital account given the following
information? Was there a net currency inflow or outflow?
imports
$145
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exports
211
72
143
86
29
37
22
RESPONSE:
ANSWER:
Debit
Credit
Current account
exports
$211
imports
$145
22
37
$81
Capital account
direct investment abroad
72
143
29
86
$128
In this problem there is a net credit balance on both the current and capital accounts,
which means there is a currency inflow. This inflow may be used to increase foreign
reserves or repay any loans from the IMF.
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